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What is a Small Business?

Defining a Small Business

The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation." The law also states that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately. The U.S Small Business Administration's Small Business Size Regulations implement the Small Business Act's mandate to SBA. SBA has also established a table of size standards, matched to North American Industry Classification System (NAICS) industries.

Size Standard

When the U.S. Congress first established the SBA, the fundamental question was just what numerical definition should SBA use to define small businesses, industry by industry, to determine what businesses were eligible for SBA's programs. Over the years SBA has established and revised numerical definitions for all for-profit industries, and this numerical definition is called a "size standard." It is almost always stated either as the number of employees or average annual receipts of a business concern.

In addition to establishing eligibility for SBA programs, all federal agencies must use SBA's size standards for its Federal Government contracts it identifies as a small business. Agencies must also use SBA's size standards for their other programs and regulations, unless they are authorized by Federal statute to use something else.

Federal Recommendations

SBA's Office of Size Standards develops and recommends small business size standards to the Size Policy Board and to the Administrator of SBA. These include recommendations on small business definitions that other Federal agencies propose. Under the Small Business Act, Federal agencies must obtain the approval of the SBA Administrator before adopting a size standard different from SBA's size standard.

The Office of Government Contracting makes formal "size determinations" on whether a business qualifies as an eligible small business for SBA programs.

The Office of Hearings and Appeals (OHA) reviews appeals of formal size determinations.

The Office of General Counsel interprets size standards regulations for the Agency and intervenes in OHA size determination appeal cases if necessary.

The Offices of Size Standards, Government Contracting, and General Counsel coordinate on all size standard issues.

The Federal Government has established a website, where you can find, review, and submit comments on Federal documents that are open for comment and published in the Federal Register, the Government's legal newspaper. As a member of the public, you can submit comments about these regulations, and have the Government take your views into account. The web site makes it easier for you to participate in Federal rule-making - an essential part of the American democratic process.

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